Financial institutions in the U.S. are increasingly clearing financial transactions using electronic systems such as the Automated Clearinghouse (“ACH”) network. In the U.S., the ACH network is a nationwide electronic funds transfer system supported by several operators, including the Federal Reserve Banks and other institutions. The U.S. ACH network is governed by a set of rules, which are administered by the National Automated Clearinghouse Association (“NACHA”). Financial institutions collect financial transactions and package them in batched ACH files, according to the NACHA rules, for forwarding to other institutions. Typically, the financial transactions are bundled as ACH items in a single ACH file before being transmitted over the ACH network.
The terms “financial transaction,” “transaction,” “ACH item,” and “item” are used interchangeably herein to refer to any batched processed electronic payment or payment instruction, whether international or domestic. A “financial transaction” can also include information associated with a batched processed electronic payment or payment instruction. A payment or payment instruction therefor can be e.g., a credit, a debit, or a rejected or returned transaction. The terms “ACH file,” “electronic file,” and “file” are used interchangeably herein to refer to any collection of batched and/or unbatched ACH items. The term “financial institution” is generally used herein to refer to any person or entity that processes, creates, transmits, or receives data associated with a financial transaction.
The U.S. ACH network is being expanded for use with financial institutions in other countries. An International ACH links the U.S. ACH network to an ACH or comparable low-value, non-urgent payment system in countries outside the U.S. For outbound payments from the U.S. to a foreign country, an originating depository financial institution (“ODFI”) can forward ACH files through a domestic gateway operator (“DGO”), or more specifically a U.S. gateway operator (“USGO”), and further through a foreign gateway operator (“FGO”) in the country of the receiving depository financial institution (“RDFI”). For inbound payments to the U.S., a foreign financial institution can forward an ACH file or comparable file through an FGO to a USGO and on to a receiving financial institution in the U.S. The term “gateway operator” is generally used herein to refer to a financial institution that serves as a central clearing facility through which other financial institutions transmit or receive ACH items and/or ACH files. The gateway operator (“GO”) passes the ACH files into or out of its domestic ACH or comparable payment system, and in some instances, performing any necessary reformatting of the ACH files. The GOs may send or receive ACH files in NACHA format or in other agreed formats such as ISO or SWIFT.
In general, ACH systems permit origination and settlement in the originating and receiving countries' domestic currencies. In an international transaction where the originating and receiving countries employ different currencies, a foreign exchange (“FX”) conversion must take place.
Traditionally, the International ACH has only accommodated fixed to variable (“FV”) payments. In FV credits outbound from the U.S., settlement is effected two times, the first by the USGO, which settles between the ODFI and the FGO, and the second by the FGO, which settles good funds to or from an account of the RDFI. In FV credit payments, a fixed amount of domestic currency is converted into whatever amount of the destination currency can be purchased when the FGO receives the ACH file, usually the banking day after the ODFI creates the ACH item. The term “create” is generally used herein to refer to generating a properly formatted ACH item, e.g., from information received by the ODFI from a customer. Until the FGO processes the ACH item—one or more banking days after item creation—the ODFI is unaware of the precise amount of foreign currency that will be credited to the RDFI.
Business contracts often require ODFIs to transmit specified, fixed amounts of foreign currency to RDFIs. Thus, a need exists in the art for a system and method of managing foreign credit payments, whereby ODFIs can specify pre-determined foreign currency payment amounts.